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Derivatives and Hedging Activity
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activity Derivatives and Hedging Activity
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from both our business operations and economic conditions. Refer to Note 14 to the consolidated financial statements included in our Form 10-K for further discussion of our risk management objectives and policies.
Designated Hedges
The Company does not generally elect to apply the hedge accounting designation to its hedging instruments. As of June 30, 2026 and December 31, 2025, the Company did not have any designated hedges.
Non-designated Hedges and Derivatives
We have entered into the following types of non-designated hedges and derivatives:
•Foreign exchange (“Fx”) forwards whereby we agree to buy or sell a specified amount of foreign currency for a specified amount of USD at a future date, economically fixing the USD amounts of foreign denominated cash flows we expect to receive or pay related to certain foreign denominated loan investments;
•Interest rate contracts which hedge a portion of our exposure to changes in interest rates; and
•Credit instruments which hedge a portion of our exposure to the credit risk of our commercial loans held-for-sale and one held-for-investment.
The following table summarizes our non-designated derivatives as of June 30, 2026 (notional amounts in thousands):
Type of DerivativeNumber of ContractsAggregate Notional AmountNotional CurrencyMaturity
Fx contracts – Buy Euros (“EUR”)848,328 EURJuly 2026 - September 2027
Fx contracts – Buy Pounds Sterling (“GBP”)42,322 GBPJanuary 2027 - September 2027
Fx contracts – Buy Australian dollar (“AUD”)3403,454 AUDAugust 2026 - October 2029
Fx contracts – Sell EUR166482,404 EURJuly 2026 - December 2030
Fx contracts – Sell GBP240436,065 GBPJuly 2026 - November 2029
Fx contracts – Sell AUD551,233,452 AUDJuly 2026 - May 2030
Fx contracts – Sell Swiss Franc (“CHF”)411,243 CHFAugust 2026 - May 2027
Fx contracts – Sell Swedish Kronas (“SEK”)
32355,800 SEKAugust 2026 - February 2029
Interest rate swaps – Paying fixed rates251,928,695 USDJuly 2026 - September 2035
Interest rate swaps – Receiving fixed rates93,913,380 USDJanuary 2027 - June 2031
Interest rate futures
646,700 USDAugust 2026
Interest rate caps2469,500 USDMay 2027 - June 2030
Credit instruments260,000 USDDecember 2030 - July 2031
Total556

The above table excludes certain interest rate derivatives which serve as an economic hedge related to our residential loan portfolio. In 2024, we entered into a series of derivative transactions related to this loan portfolio in an effort to extend hedge duration. The current high interest rate environment has caused these loans to experience lower prepayment speeds than was originally anticipated at the time of their origination. In order to minimize volatility in future earnings and cash flows while minimizing the current cash outflow, we: (i) entered into a series of reverse swap trades to offset approximately 100% of the dollar duration of our existing interest rate swaps through the end of 2024 and approximately 80% between 2025 through their termination in the second quarter of 2027; and (ii) entered into a forward starting swap from June 2027 for four years which pays fixed and receives floating in order to replace the swaps reversed. Given the volume of these hedges and their sequential nature, the notional value of these new swaps is not representative of the notional value of our portfolio, and they were thus excluded from the table above. The notional value of the swaps described in (i) above that were not yet effective and not included as of June 30, 2026 totaled $1.9 billion. Because the reverse swaps and the forward starting swap are not specifically designated to assets or liabilities, changes in their respective fair values are recorded currently in earnings. The above table also excludes $2.8 billion notional amount of certain other interest rate swaps we entered into prior to June 30, 2026, but that were not yet effective.

Derivative Investment

In May 2026, we entered into a bespoke credit default swap (the “CDS”) with a financial institution under which we provide credit protection on certain obligations of an infrastructure security. The CDS has an initial notional amount of $60.0 million, expires in November 2032, and provides that we receive a fixed premium of 2.50% per annum on the outstanding notional amount. Upon the occurrence of specified credit events, we may be required to purchase certain of those credit-protected obligations through physical settlement. The CDS also contains customary collateral posting requirements and permits the counterparty to terminate all or a portion of the contract in or after November 2026, subject to payment of an early unwind amount under certain circumstances. Consistent with our other derivative instruments, the CDS is carried at fair value which, as of June 30, 2026, was nominal. As of June 30, 2026, we had posted $12.0 million of cash collateral under the CDS, which earns us interest at SOFR. Such collateral is split evenly between an account classified within restricted cash and a counter-party held account classified within other assets on our condensed consolidated balance sheet.
The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025 (amounts in thousands):
Fair Value of Derivatives
in an Asset Position (1) as of		Fair Value of Derivatives
in a Liability Position (2) as of
June 30,
2026
December 31, 2025
June 30,
2026
December 31, 2025
Foreign exchange contracts$22,791 $26,770 $64,972 $72,351 
Interest rate contracts1,173 18,657 25,723 10,060 
Credit instruments442 386 878 1,572 
Total derivatives$24,406 $45,813 $91,573 $83,983 
___________________________________________________
(1)Classified as derivative assets in our condensed consolidated balance sheets.
(2)Classified as derivative liabilities in our condensed consolidated balance sheets.
The table below presents the effect of our derivative financial instruments on the condensed consolidated statements of operations for the three and six months ended June 30, 2026 and 2025 (amounts in thousands):

Derivatives Not Designated
as Hedging Instruments		Location of Gain (Loss) 
Recognized in Income
Amount of Gain (Loss)
Recognized in Income for the
Three Months Ended June 30,
Amount of Gain (Loss)
Recognized in Income for the
Six Months Ended June 30,
2026202520262025
Foreign exchange contractsLoss on derivative financial instruments, net$(5,503)$(95,317)$1,315 $(127,616)
Interest rate contractsLoss on derivative financial instruments, net2,989 (5,385)(6,637)(12,672)
Credit instrumentsLoss on derivative financial instruments, net(510)(594)(165)(697)
$(3,024)$(101,296)$(5,487)$(140,985)